Aggregates related to national income - GNP

Correct answer: A. Depreciation is ₹8500 crore

Explanation: Gross and net aggregates must be compared at the same valuation basis. Since both figures are at market price, the difference between GNPMP and NNPMP represents consumption of fixed capital, commonly called depreciation. Depreciation = ₹160000 crore − ₹151500 crore = ₹8500 crore. Thus, option A is correct.

Correct answer: B. ₹142000 crore

Explanation: The relationship between gross domestic product and gross national product at market price is GNPMP = GDPMP + NFIA. Substituting the values gives GNPMP = ₹142000 crore + ₹0 = ₹142000 crore. When NFIA is zero, income from abroad exactly offsets income paid abroad, so GDPMP and GNPMP are equal. Option B is correct.

Correct answer: C. ₹124000 crore

Explanation: To obtain GNP at market price from GNP at factor cost, add net indirect taxes. The required calculation is GNPMP = GNPFC + NIT = ₹118000 crore + ₹6000 crore = ₹124000 crore. The NNPFC figure is extra information for this question; it could be used to find depreciation, but it does not change the conversion. Therefore, option C is correct.

Correct answer: A. GNP = GDP + NFIA

Explanation: GNP is obtained from GDP by adding net factor income from abroad, abbreviated as NFIA. NFIA represents factor income received from abroad minus factor income paid to non-residents. Therefore, GNP = GDP + NFIA. Depreciation converts gross to net, NIT changes market price to factor cost, and imports are not the adjustment used for domestic-to-national conversion.

Correct answer: B. ₹1250 crore

Explanation: The relationship between the two aggregates is GNP = GDP + NFIA. Since NFIA is positive at ₹50 crore, it is added to GDP: ₹1200 crore + ₹50 crore = ₹1250 crore. ₹1150 crore would be correct only if NFIA were negative ₹50 crore. The other values either ignore one component or report NFIA alone.

Correct answer: A. GNP will be less than GDP

Explanation: The formula is GNP = GDP + NFIA. When NFIA is negative, adding it reduces the value of GDP; for example, GDP + (−₹20 crore) equals GDP − ₹20 crore. Consequently, GNP is less than GDP. GNP would equal GDP only when NFIA is zero, and it would exceed GDP only when NFIA is positive.

Correct answer: A. NFIA

Explanation: GDP measures the value of final goods and services produced within a country’s domestic territory, whereas GNP measures production attributable to the country’s residents. To convert GDP into GNP, we add Net Factor Income from Abroad (NFIA): GNP = GDP + NFIA. NFIA is factor income received from abroad minus factor income paid abroad. Depreciation, NIT and transfer payments do not make this domestic-to-national adjustment.

Correct answer: C. ₹1900 crore

Explanation: Gross National Product is calculated using GNP = GDP + NFIA. Substituting the given values gives GNP = ₹2000 crore + (−₹100 crore) = ₹1900 crore. Because NFIA is negative, residents’ factor income received from abroad is less than factor income paid abroad, so national output is lower than domestic output by ₹100 crore. Therefore, option C is correct.

Correct answer: A. Because GDP is a domestic concept

Explanation: GDP is a domestic concept because it measures the value of final goods and services produced within the domestic territory of a country, regardless of whether the producers are residents or foreigners. Net factor income from abroad, or NFIA, records the difference between factor income received from the rest of the world and factor income paid abroad. Adding NFIA converts GDP into GNP, so it is not part of GDP itself.

Correct answer: A. 8,300 crore

Explanation: The relationship is GNP at market price = GDP at market price + NFIA. Therefore, GDP at market price = GNP at market price - NFIA = 8,800 - 500 = 8,300 crore. Since the given NFIA is positive, GNP is higher than GDP by 500 crore. Adding NFIA to GNP would be incorrect because NFIA is added only when converting GDP into GNP.

Correct answer: A. Net factor income from abroad (NFIA)

Explanation: GDP measures the value of final goods and services produced within a country’s domestic territory, whereas GNP measures the income generated by the normal residents of a country. Therefore, net factor income from abroad is added to GDP: GNP = GDP + NFIA. Depreciation and net indirect taxes are used for other national-income conversions, not for converting GDP into GNP.

Correct answer: B. ₹3,150 crore

Explanation: Gross National Product is calculated by adding net factor income from abroad to Gross Domestic Product. Thus, GNP = GDP + NFIA = ₹3,000 crore + ₹150 crore = ₹3,150 crore. Since NFIA is positive, it increases GNP above GDP. ₹2,850 crore would be correct only if NFIA were negative ₹150 crore.

Correct answer: A. Domestic is based on territory, national is based on residents

Explanation: GDP is a domestic concept because it measures production taking place within a country’s domestic territory, regardless of whether the producers are residents or foreigners. GNP, or national income, is a national concept based on the income of the country’s residents. The relationship is GNP = GDP + NFIA, so option A is correct.

Correct answer: A. Net factor income from abroad (NFIA) is added

Explanation: GDP measures the value of final goods and services produced within a country’s domestic territory, while GNP measures production attributable to the country’s normal residents. The conversion is therefore made by adding Net Factor Income from Abroad: GNP = GDP + NFIA. Depreciation changes gross into net, while NIT changes factor-cost and market-price measures.

Correct answer: A. Domestic territory versus normal residents

Explanation: GDP measures the value of final goods and services produced within a country's domestic territory, regardless of whether the producers are residents or foreigners. GNP measures the production or factor income associated with the country's normal residents, wherever that production occurs. The relationship is GNP = GDP + NFIA. Thus, option A states the basic distinction correctly.